UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA …leasingnews.org/PDF/FranklinNational.pdf · national banking association with an office located at 525 Washington Avenue North,

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

Franklin National Bank of Minneapolis, a national banking association, Plaintiff, v. Allied Health Care Services, Inc., a New Jersey corporation, and Charles K. Schwartz, an individual, Defendants.

Court File No. _________________

COMPLAINT

PARTIES

1. Plaintiff Franklin National Bank of Minneapolis (“Franklin Bank”) is a

national banking association with an office located at 525 Washington Avenue North,

Minneapolis, Minnesota 55401.

2. Defendant Allied Health Care Services, Inc. (“Defendant Allied”) is a

corporation organized under the laws of the State of New Jersey with its principal place

of business located at 89 Main Street, Orange, New Jersey 07051.

3. Defendant Charles K. Schwartz (“Defendant Schwartz”) is an individual

residing at 37 Timberline Drive, Sparta, New Jersey 07871.

JURISDICTION

4. This Court has jurisdiction over the subject matter of this action pursuant to

28 U.S.C. § 1332. The dispute is between citizens of different States and Franklin Bank’s

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Case 0:10-cv-03286-MJD-FLN Document 1 Filed 08/02/10 Page 1 of 10

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requested relief involves a matter in controversy in excess of $75,000, exclusive of

interest and costs.

5. Venue is proper in this district pursuant to agreement of the parties and 28

U.S.C. § 1391(a).

FACTS

6. On or about February 22, 2007, Defendant Allied entered into a lease

agreement (the “Lease Agreement”) with First Premier Capital, LLC (“First Premier”). A

true and accurate copy of the Lease Agreement is attached hereto and incorporated herein as

Exhibit 1.

7. As consideration to induce First Premier to enter into the Lease Agreement

and related Lease Schedule with Defendant Allied, Defendant Schwartz entered into an

Absolute, Unconditional and Continuing Guaranty Agreement (the “Guaranty”) to

personally guaranty the payment and performance obligations of Defendant Allied

pursuant to the Lease Agreement. A true and accurate copy of Defendant Schwartz’s

Guaranty is attached hereto and incorporate herein as Exhibit 2.

8. On or about May 1, 2008, First Premier entered into a Collateral

Assignment of Lease Payments and Equipment with EastBank wherein First Premier

collaterally assigned to EastBank the right to all lease payments due or to become due

under the terms of the Lease Agreement and also assigned to EastBank all of First

Premier’s “rights, title, and interest in and to the personal property” subject to the Lease

Agreement.


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9. On or about July 20, 2009, the Comptroller of the Currency Administrator

of National Banks officially certified a merger between EastBank and Franklin Bank

whereby Franklin Bank became the surviving entity after merger.

10. Accordingly, Franklin Bank is the successor-in-interest to First Premier and

EastBank by assignment, acquisition and merger.

11. The Lease Agreement provides in part:

Charges …Lessee promises to pay Lessor the Charges in accordance with the Lease Schedule(s), and the payments shall be made at Lessor’s address indicated thereon. The Monthly Charge shall be paid by Lessor’s address indicted thereon. The Monthly Charges shall be paid by Lessee monthly in advance with the first full month’s payment due on the Commencement Date. If the Installation Date does not fall on the first day of a month, the Charge for the period from the installation Date to the Commencement Date shall be an amount equal to the Monthly Charges provided by third (30) and multiplied by the number of days from and including the Installation date to the Commencement Date. Charges for taxes made in accordance with Section 4 and charges made under any other provision of this Lease Agreement and payable by Lessee shall be paid to Lessor at Lessor’s address specified on the Lease Schedule(s) on the date specified in invoices delivered to Lessee. Lessee agrees that if payment as specified above is not received by Lessor on the due date, Lessee shall, to the extend permitted by law, pay on demand, as a late charge, an amount equal to one and one-half percent ( 1 ½%) or the maximum percentage allowed by law, whichever is less, of the amount then due for each thirty (30) days or portions thereof that said overdue payments are not made. Event of Default The occurrences of any of the following events shall constitute an event of default under this Lease Agreement and/or any Lease Schedule: …

(d) Lessee fails to make any payment owed to Lessor hereunder within fifteen (15) days after its due date;

…


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Remedies Should any default occur and be continuing, Lessor may, in order to protect the interests and reasonably expected profits and bargain of Lessor, and with or without notice or demand upon, Lessee, pursue and enforce, successively and/or concurrently, any one or more of the following remedies: (a) Without retaking the Equipment

(1) recover from Lessee all accrued and unpaid Charges and other amounts then due and owing under the terms hereof,

(2) recover from Lessee from time to time all Charges and other amounts as and when becoming due hereunder,

(3) accelerate and cause to become immediately due and payable all Charges and other amounts due and/or likely to be come due hereunder and recover from Lessee the then worth to Lessor of such amounts,

(4) cause to become immediately due and payable and recover from Lessee (i) the then applicable Unrecovered Investment in the Equipment, plus (ii) the then worth to Lessor of its anticipated remaining loss of bargain;

(b) Retake possession of the Equipment without liability

to Lessee therefore which is hereby expressly waived, and (1) terminate the term of this Lease Agreement as

to the Equipment, (2) recover from Lessee all accrued and unpaid

Charges and other amounts owing under the terms hereof,

(3) sell the Equipment at public or private sale, and recover from Lessee the difference, if any, by which the Net Proceeds of sale shall be less than (i) the Lessor’s then applicable Unrecovered Investment in the Equipment, plus (ii) the then worth to Lessor of its anticipated remaining loss of bargain,

(4) re-lease the Equipment to a third party for the account of Lessee and recover from Lessee


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when becoming due any deficiency between the Charges provided herein and those received from such third party,

(5) re-lease the Equipment to a third party for the account of Lessee and recover from Lessee the then worth to Lessor of any deficiency between the Charges provided herein and those receivable from such third party over the re-leased term,

(6) recover from Lessee the then worth to Lessor of the excess of the Charges reserved herein for the balance of the whole term (or any remaining term not covered by any re-lease) over the then reasonable rental value of the Equipment; and

(c) Pursue any other remedy Lessor may otherwise have,

at law, in equity or under any statute and recover such other actual damages as may be incurred by Lessor.

Costs and Attorneys’ Fees In addition to all other sums which Lessee may be called upon to pay under the provisions of this Lease Agreement, Lessee will pay to Lessor its reasonable costs of collection or other out-of-pocket costs and expenses and attorney’s fees on account of this Lease Agreement. Miscellaneous This Lease Agreement, the Lease Schedule(s), attached riders, and any documents or instruments issued or executed pursuant hereto shall be governed by the laws of the State of Minnesota and constitute the entire Lease Agreement between Lessor and Lessee with respect to the Equipment superseding all prior correspondence between the parties... The parties hereto submit to the jurisdiction of the courts of the State of Minnesota and Lessee hereby waive local venue with respect to claims arising out of this Lease Agreement… THE LESSEE AND ANY GUARANTORS OF THE LESSEE’S OBLIGATIONS UNDER THIS LEASE AGREEMENT HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN


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TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS LEASE AGREEMENT AND THE LEASE SCHEDULES OR THE RELATIONSHIP ESTABLISHED HEREUNDER.

12. The Guaranty provides in part:

Guaranty. Guarantor absolutely, unconditionally, and irrevocably guarantees to Lessor the due and punctual payment, observance and performance by Lessee of all of the obligations and liabilities of Lessee under the Lease, both present and future, and any and all subsequent renewals, continuations, modifications, supplements and amendments. If Lessee fail duly and punctually to pay, observe and perform any or all of the Obligations, Guarantor shall, upon demand by Lessor, immediately pay, perform and observe such Obligations strictly and in accordance with the terms of the Lease. This Guaranty shall be effective immediately and shall remain in full force and effect until all of the Obligations are paid, performed and observed in full.

Strict Observance. Guarantor agrees that the Obligations will be paid, performed, and observed strictly and in accordance with their terms, regardless of any rights of Lessee against Lessor. The obligations of Guarantor hereunder are without regard to the obligations of any other person or entity, and shall not be affected by any circumstances, including without limitation: (i) any act or omission by Lessor, which act or omission is hereby agreed to; (ii) any lack of enforcement or retention of rights against Lessee, Guarantor or any other person or entity or any property; ... (v) any failure, omission or delay on the part of Lessee or any other person or entity to comply with any term of the Lease; ... (vii) any voluntary or involuntary bankruptcy, insolvency, reorganization, composition, receivership or similar proceedings with respect to Lessee, Guarantor, or any other person or entity or any properties or creditors, or any taken by any court, trustee or receiver in any such proceeding; ... (x) any merger or consolidation of Lessee or Guarantor into or with any other corporation or entity, or any sale, lease or transfer of any of the assets of Lessee or Guarantor to any person or entity; (xi) any change in the ownership of Lessee, or any change in or termination of any relationship between Lessee and Guarantor…


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Waivers of Notice, Etc. Guarantor waives diligence, presentment, demand, protest, or notice of any kind whatsoever with respect to this Guaranty or the Obligations, including without limitation ... (ii) any right to the enforcement, assertion or exercise of any right, power, privilege or remedy conferred in the Lease or otherwise, (iii) any requirement to exhaust any remedies or to mitigate damages resulting from a default under the Lease…

Guaranty of Performance, Etc This Guaranty is a guaranty of payment and performance .... Guarantor shall pay to Lessor all reasonable attorneys' fees and other reasonable expenses incurred by Lessor in protecting its interests hereunder or in exercising its rights and remedies provided hereunder, together with interest on such sums at the lesser of .05% per day or the maximum rate permitted by law, from the date which such expenses are incurred.

Acceleration. Guarantor agrees that if any Event of Default as defined in the Lease occurs, then any and all Obligations of the undersigned under this Guaranty or otherwise shall, at the Lessor's option and without notice, forthwith become due and payable by Guarantor.

Miscellaneous. This Guaranty shall be governed by the laws of the State of Minnesota. The Guarantor and Lessor hereby consent to the jurisdiction of any Federal or State Court located in Hennepin County for a determination of any dispute ... as to any matters whatsoever arising out of or in any way connected with this Guaranty and authorize service of process on the Guarantor by certified mail sent to the Guarantor at the address for the Guarantor as set forth herein below.

13. On or about May 1, 2008, Defendant Allied entered into Lease Schedule No. 016

pursuant to the terms and conditions of the Lease Agreement for purposes of leasing 50 LifeCare

PLV 102 ventilators (the “Ventilators”). A true and accurate copy of Lease Schedule 016 is

attached hereto and incorporated herein as Exhibit 3.


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14. Pursuant to the Lease Agreement and Lease Schedule 016, Defendant Allied

was required to pay $6,000 per month for 60 consecutive months commencing on May 1,

2008. Defendant Schwartz guaranteed theses payments.

15. The Defendants have defaulted on their obligations arising from the Lease

Agreement, Lease Schedule 016 and the Guaranty for, among other things, failing to make

payments as they came due.

16. Despite demand, Defendants have failed and refused to cure the defaults and

they continue to possess and control the Ventilators described in Lease Schedule 016.

17. Pursuant to the terms of the Lease Agreement and Guaranty, Franklin Bank

is entitled to attorneys’ fees in the enforcement of the Lease Agreement and Guaranty.

18. The total amount presently due and owning from Defendants to Franklin

Bank is $216,000 plus interest, late fees, attorneys’ fees, and costs, and applicable taxes

all of which continue to accrue.

COUNT I

Breach of Contract (Against Defendant Allied)

19. Franklin Bank incorporates paragraphs 1 through 18 above as though set

forth herein.

20. The parties' Lease Agreement and Lease Schedule 016 are enforceable

contracts.

21. Pursuant to the contracts, the Ventilators were leased to Defendant Allied.


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22. Defendant Allied breached the contracts by failing and refusing to remit

payment for the leased Ventilators.

23. As a direct and proximate result, Franklin Bank has been damaged in an

amount of $216,000 plus interest, late fees, attorneys’ fees, and costs, and applicable

taxes all of which continue to accrue.

COUNT II

Breach of Contract (Against Defendant Schwartz)

24. Franklin Bank incorporates paragraphs 1 through 23 above as though set

forth herein.

25. The Guaranty constitutes an enforceable contract.

26. Pursuant to the contracts, Franklin Bank leased the Ventilators to Defendant

Allied and Defendant Schwartz guaranteed payment and performance.

27. Defendant Schwartz breached the Guaranty by failing and refusing to remit

payment for the Ventilators.

28. As a direct and proximate result, Franklin Bank has been damaged in an

amount of $216,000 plus interest, late fees, attorneys’ fees, and costs, and applicable

taxes payable during the lease period.

WHEREFORE, Plaintiff Franklin Bank demands judgment jointly and severally

against Defendants as follows:

1. Awarding Franklin Bank $216,000, plus interest, late fees, attorneys’ fees,

and costs, and applicable taxes all of which continue to accrue.


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2. For any and all incidental damages.

3. For such other relief as the Court shall deem just and equitable.

MESSERLI & KRAMER P.A.

Dated: July 30, 2010 s/ Benjamin J. Court John Harper III (#41397) Benjamin J. Court (#319016) 1400 Fifth Street Towers 100 South Fifth Street Minneapolis, Minnesota 55402 (612) 672-3600 ATTORNEYS FOR PLAINTIFF

849770.1


Case 0:10-cv-03286-MJD-FLN Document 1-1 Filed 08/02/10 Page 1 of 8








�JS 44 (Rev. 12/07) CIVIL COVER SHEETThe JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as providedby local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiatingthe civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

I. (a) PLAINTIFFS DEFENDANTS

(b) County of Residence of First Listed Plaintiff County of Residence of First Listed Defendant(EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE LAND INVOLVED.

(c) Attorney’s (Firm Name, Address, and Telephone Number) Attorneys (If Known)

II. BASIS OF JURISDICTION (Place an “X” in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an “X” in One Box for Plaintiff(For Diversity Cases Only) and One Box for Defendant)

� 1 U.S. Government � 3 Federal Question PTF DEF PTF DEFPlaintiff (U.S. Government Not a Party) Citizen of This State � 1 � 1 Incorporated or Principal Place � 4 � 4

of Business In This State

� 2 U.S. Government � 4 Diversity Citizen of Another State � 2 � 2 Incorporated and Principal Place � 5 � 5Defendant (Indicate Citizenship of Parties in Item III) of Business In Another State

Citizen or Subject of a � 3 � 3 Foreign Nation � 6 � 6 Foreign Country

IV. NATURE OF SUIT (Place an “X” in One Box Only)CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES

� 110 Insurance PERSONAL INJURY PERSONAL INJURY � 610 Agriculture � 422 Appeal 28 USC 158 � 400 State Reapportionment� 120 Marine � 310 Airplane � 362 Personal Injury - � 620 Other Food & Drug � 423 Withdrawal � 410 Antitrust� 130 Miller Act � 315 Airplane Product Med. Malpractice � 625 Drug Related Seizure 28 USC 157 � 430 Banks and Banking� 140 Negotiable Instrument Liability � 365 Personal Injury - of Property 21 USC 881 � 450 Commerce� 150 Recovery of Overpayment � 320 Assault, Libel & Product Liability � 630 Liquor Laws PROPERTY RIGHTS � 460 Deportation

& Enforcement of Judgment Slander � 368 Asbestos Personal � 640 R.R. & Truck � 820 Copyrights � 470 Racketeer Influenced and� 151 Medicare Act � 330 Federal Employers’ Injury Product � 650 Airline Regs. � 830 Patent Corrupt Organizations� 152 Recovery of Defaulted Liability Liability � 660 Occupational � 840 Trademark � 480 Consumer Credit

Student Loans � 340 Marine PERSONAL PROPERTY Safety/Health � 490 Cable/Sat TV (Excl. Veterans) � 345 Marine Product � 370 Other Fraud � 690 Other � 810 Selective Service

� 153 Recovery of Overpayment Liability � 371 Truth in Lending LABOR SOCIAL SECURITY � 850 Securities/Commodities/ of Veteran’s Benefits � 350 Motor Vehicle � 380 Other Personal � 710 Fair Labor Standards � 861 HIA (1395ff) Exchange

� 160 Stockholders’ Suits � 355 Motor Vehicle Property Damage Act � 862 Black Lung (923) � 875 Customer Challenge� 190 Other Contract Product Liability � 385 Property Damage � 720 Labor/Mgmt. Relations � 863 DIWC/DIWW (405(g)) 12 USC 3410� 195 Contract Product Liability � 360 Other Personal Product Liability � 730 Labor/Mgmt.Reporting � 864 SSID Title XVI � 890 Other Statutory Actions� 196 Franchise Injury & Disclosure Act � 865 RSI (405(g)) � 891 Agricultural Acts

REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS � 740 Railway Labor Act FEDERAL TAX SUITS � 892 Economic Stabilization Act� 210 Land Condemnation � 441 Voting � 510 Motions to Vacate � 790 Other Labor Litigation � 870 Taxes (U.S. Plaintiff � 893 Environmental Matters� 220 Foreclosure � 442 Employment Sentence � 791 Empl. Ret. Inc. or Defendant) � 894 Energy Allocation Act� 230 Rent Lease & Ejectment � 443 Housing/ Habeas Corpus: Security Act � 871 IRS—Third Party � 895 Freedom of Information� 240 Torts to Land Accommodations � 530 General 26 USC 7609 Act� 245 Tort Product Liability � 444 Welfare � 535 Death Penalty IMMIGRATION � 900Appeal of Fee Determination� 290 All Other Real Property � 445 Amer. w/Disabilities - � 540 Mandamus & Other � 462 Naturalization Application Under Equal Access

Employment � 550 Civil Rights � 463 Habeas Corpus - to Justice� 446 Amer. w/Disabilities - � 555 Prison Condition Alien Detainee � 950 Constitutionality of

Other � 465 Other Immigration State Statutes� 440 Other Civil Rights Actions

V. ORIGINTransferred fromanother district(specify)

Appeal to DistrictJudge fromMagistrateJudgment

(Place an “X” in One Box Only)� 1 Original

Proceeding� 2 Removed from

State Court� 3 Remanded from

Appellate Court� 4 Reinstated or

Reopened� 5 � 6 Multidistrict

Litigation� 7

VI. CAUSE OF ACTIONCite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):

Brief description of cause:

VII. REQUESTED IN COMPLAINT:

� CHECK IF THIS IS A CLASS ACTIONUNDER F.R.C.P. 23

DEMAND $ CHECK YES only if demanded in complaint:JURY DEMAND: � Yes � No

VIII. RELATED CASE(S) IF ANY (See instructions): JUDGE DOCKET NUMBER

DATE SIGNATURE OF ATTORNEY OF RECORD

FOR OFFICE USE ONLY

RECEIPT # AMOUNT APPLYING IFP JUDGE MAG. JUDGE

Franklin National Bank of Minneapolis, a national bankingassociation

Hennepin

Benjamin J. Court, Messerli & Kramer P.A., 1400 Fifth StreetTowers, 100 South Fifth Street, Minneapolis, MN 55402-1217

Allied Health Care Services, Inc., et al.

Essex County, New Jerse

28 U.S.C. § 1332

Breach of Contract

✔

07/30/2010 s/ Benjamin J. Court


Documents

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA …leasingnews.org/PDF/FranklinNational.pdf · national banking association with an office located at 525 Washington Avenue North,